Europe banks face $19 bln Q4 writedown

Europe's investment banks face another €14 billion ($18.9 billion) of writedowns for the current quarter, with Deutsche Bank and Credit Agricole most exposed, analysts at JPMorgan said.

The forecast came as the industry braces for US bank Goldman Sachs to post its first quarterly loss since 1999 later on Tuesday as structured asset valuations were hit again in recent months.

Europe's top 10 wholesale and investment banks have written down €91 billion to date, and need to take a further 13% to reach mark-to-market valuations on structured credit assets, JPMorgan analyst Kian Abouhossein said in a note.

Deutsche Bank and France's Credit Agricole need to write down €2.3 billion each, and Britain's Barclays needs to mark down a further €2 billion, he forecast.

Commercial mortgage backed securities (CMBS) are the assets with the highest risk of further markdowns, Abouhossein said.

Morgan Stanley is also due to end up in the red when it reports fourth-quarter results on Wednesday. Analysts are watching it and Goldman to give an indication of the scale of writedowns across the industry, especially for CMBS assets and leveraged finance, and the outlook for revenues.

“We remain cautious on the European banks sector at this point,” Abouhossein said. “Although we see the structured credit crisis coming to an end, we expect traditional credit quality to put pressure on banks in 2009, and funding to remain a concern in 2009/10.”

JPMorgan said Credit Suisse and France's BILLIONP Paribas now appear “relatively clean” and face modest further markdowns of €572 million and €794 million respectively.

It forecast additional writedowns of around Ł900 million ($1.3 billion) for Royal Bank of Scotland, $2.2 billion for HSBC, CHF 1.4 billion ($1.2 billion) for UBS, €1.9 billion for SocGen and €600 million for Natixis. (Reuters)